SpotXchange’s Blog

iMedia Connection, Published: December 05, 2007 By Michael Shehan  

Navigate your clients through the fast-changing online video advertising world with some pricing advice from SpotXchange’s CEO.

Media buyers face certain challenges today when building plans for online video ad buys — challenges not seen in other areas of online advertising, such as display.

Online video advertising, while white hot, is still in its infancy. At this stage, media buyers have limited access to available inventory through ad planning tools. Further, there are wild expectations (reasonable or not) by both advertisers and publishers on what video advertising should cost, which creates challenges when pricing campaigns for clients. This article explores how media buyers can forge ahead and price out successful video ad campaigns on behalf of their clients.

Many buyers grapple with the cost of video sponsorship. Should it cost more than TV because of more granular targeting, more accountability and the ability to optimize campaigns on the fly to eliminate waste? Or, should it cost less because audience levels haven’t reached the critical mass of TV yet? The answer: yes!

There is no general rule for pricing out inventory; however the following broad ranges are starting to emerge:

• Professional content on tier one sites (e.g., NBC): $20 to $75 CPM
• Original content, smaller niche sites (e.g., LiveVideo’s LiveBands): $10 to $50 CPM
• Local video inventory (state or city): $10 to $40 CPM
• Professional content distributed on syndication networks (e.g., Voxant’s Newsroom): $10 to $25 CPM
• User-generated content (e.g., MySpace): $1 to $20 CPM

It’s difficult to say what fair market value CPMs are for video ad inventory. Pricing factors include:

• Supply and demand
• Quality of video content
• Targeting capabilities
• Frequency
• Share of voice
• Placement
• Performance (CTR, average view time of video commercial and conversions)

And while most video ad inventory is sold on a CPM basis, some publishers are open to testing new models like cost-per-click and cost-per-acquisition provided the effective CPM meets their needs, so keep that in mind if a client is more comfortable with those models.

It’s also important for media buyers to consider a few other general rules when building a media plan in order to get the price that works for their clients.

When discussing the potential buy with sellers, be as specific as possible in identifying the desired type of inventory. This greatly reduces the iterations required to get an accurately priced proposal, allows fairly comparative pricing from several sellers and ultimately allows for the set up of a successful campaign with fewer surprises. Specifics to share with sellers include:

• Video inventory type. Video advertising inventory includes video banner ads, in-stream video ads (pre/mid/post with companion) or overlay banner ads (popularized by YouTube).
• Targeting criteria. Targeting generally includes demographic, psychographic, geographic (country, possibly state and city), contextual (on ad networks), behavioral, keyword/tag or targeting of specific videos.
• Target volume. Identify key metrics that are important, like CTR and impressions.

Additionally, let them propose the CPMs. If it sounds too high, counter. They may come back with a lower than expected CPM.

Once all of the proposals are gathered, determine if the target CPMs and impression volume for the desired inventory can be hit. Once a buyer’s expectations have been set, it’s best to allow sellers a reasonable amount of flexibility in campaign optimization.

This brings us to the next part of the conversation. Media buyers like predictability, but online video advertising can be anything but predictable. Just like broadcast, sellers can come up short on delivered impressions. Unlike broadcast, it’s not necessary to settle for a “make good.” Buys should be spread across several networks and properties; they should be smaller than the overall budget, and then dollars should be applied during the campaign to the targets that perform best. Rep firms and ad networks typically do a better job at this for their clients given the networks’ breadth.

Over time this process will get easier and more transparent as video ad networks and exchanges tie themselves to inventory sources. But in the interim, dive in now to get the needed experience to navigate clients through the fast changing and growing online video advertising world.

Michael Shehan is president/CEO of SpotXchange.

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